President Barack Obama's decision to pressure Iran could have an effect on gas prices, a sensitive issue in an election year. Photograph: Herb Swanson/EPA

President Barack Obama gave the go-ahead Friday for the tightest sanctions yet against Iran's oil industry, a move that risks pushing fuel prices even higher ahead of the November elections and raising tensions even further with Tehran.

The US will take punitive measures against any country that fails to reduce oil imports from Iran. These countries include China.

The sanctions were passed by Congress in December, but the lawmakers left Obama to make the final judgement about the impact a reduction in Iranian oil would have on the US and the world economy. The deadline was Friday.

In a statement from the White House, Obama said he decided that though oil supplies are tight, there are enough non-Iranian supplies to allow countries to reduce imports from Iran.

In a briefing by the administration ahead of the announcement, an official said these amounted to the toughest sanctions yet against Iran.

It is an extremely dangerous move by the White House, one acknowledged by vice-president Joe Biden who, speaking at an election fundraiser in Chicago on Thursday night, said that Obama's re-election chances could be scuppered by events in the Gulf.

"I don't think we'll be beaten by those [Republican] candidates," Biden said. "I think we'll be beaten – if we are – by something happening in the Eurozone or something happening in the Gulf, which could be difficult for us … But even with that I feel good."

Israel is publicly threatening to launch an air strike against Iran's nuclear facility. The US, Israel, Europe and other countries claim Iran is seeking a nuclear weapons capability, which Tehran has denied.

The Obama administration says it is pressing Israel to hold back on an air strike to allow sanctions to work.

Until now, Iran has been able to shrug off sanctions against specific individuals, groups and banks but it is heavily dependent on oil exports. Tehran could react two ways: by retaliating or by caving in, suspending its uranium enrichment programme that the West says could lead to a nuclear weapons capability.

In his statement, Obama said the oil market had become increasingly tight in the first two months of the year and blamed disruption in South Sudan, Syria, Yemen, Nigeria and the North Sea. "In addition, international concerns over Iran's nuclear activities and recent steps taken to reduce the amount of Iranian crude oil and petroleum product imports are contributing to an increased demand for non-Iranian crude oil," he said.

"Nonetheless, there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil."

He added that many buyers of Iranian oil had already reduced their oil imports or were in discussion with alternative suppliers.

The sanctions are due to come into effect on 28 June. The EU is due to impose an Iranian oil embargo on 1 July.

The Obama administration exempted 10 European countries from punitive measures for importing Iranian oil, including Britain, France and Germany, as well as Japan because they had already begun reducing imports. The onus is on China, India, South Korea and other countries also importing Iranian oil to demonstrate to the US they are also reducing imports. Failure to do so could mean the US targetting foreign financial institutions, barring them from operating in America.

The original sanction legislation, passed unanimously by the Senate, was co-authored by Democratic senator Bob Menendez, who said in a statement Friday: "Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions." He predicted most countries would comply.

The National Jewish Democratic Council, which is normally supportive of Obama, welcomed the move. Its president, David Harris, said: "Today's announcement marks the latest major step that this president has taken to prevent a nuclear-armed Iran, and we are truly grateful for his decisive action."

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